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Friday, April 23, 2021

What Is a Third Party Special Needs Trust?

Do you have a loved one with special needs? If so, he or she may be receiving needs-based government benefits such as Medicaid or Social Security to help cover essential and basic costs. While these government benefits can act as a critical financial resource for many, they do not cover much more than the basics. As such, you may want to provide financial support for your loved one with special needs. This, however, can be tricky considering you do not want your financial report to jeopardize your loved one’s continued receipt of those need-based government benefits. Here is where a third-party special needs trust may be the answer.

What Is a Third Party Special Needs Trust?

A special needs trust is a trust established for the benefit of a beneficiary with special needs. A first party special needs trust is one that is funded by the individual with special needs trust himself or herself. He or she may have been awarded a settlement in a personal injury action or received an inheritance. These are the kinds of funds that are often used in the establishment of a first-party special needs trust.

A third party special needs trust, on the other hand, is one established by someone other than the individual with special needs. Usually, it is a family member or loved one looking to provide financial support to a person with special needs without risking his or her loss of government benefits. You see, a properly structured special needs trust removes assets that would otherwise be included in need-based government benefits eligibility calculation outside of consideration. This is because assets held within the trust are deemed not to be owned or under the control of the individual with special needs. Furthermore, the funds held in special needs trust are not intended to replace government benefits, but to supplement them and provide for things not covered by government benefits, but which can play a crucial role in supporting the quality of life for a person with special needs.

In order to properly fund a third-party special needs trust, you will need to transfer assets into the trust. This will involve retitling assets so that they are held by the trust, as opposed to by you or the individual with special needs. The trust agreement should be clear about how and under what circumstances trust distributions should be made. Improper distributions can far too easily count against the individual with special needs and jeopardize their government benefits.

Estate Planning Attorney

Establishing a third-party special needs trust can provide a great deal of support for your loved one with special needs. It is critical, however, that this type of trust be properly established and administered so that proceeds from the trust do not result in penalty and jeopardize the much-needed government benefits your loved one with special needs may be receiving. For trusted legal counsel in the proper establishment of a special needs trust, Monk Law is here for you. Contact Monk Law today.


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| Phone: 803-594-4453
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| Phone: 704-369-9977

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